MAT SAYS:- Garfield Bennett's JFSC sanction is a timely reminder to review conflicts and retrocession policies & training

The JFSC’s sanction against Garfield Bennett Trust Company Limited (GBTCL), issued on 31 July 2025, is a potent reminder for Jersey trust companies to review their conflicts of interest and retrocession fee policies.

SUMMARY OF THE JFSC SANCTION

• Penalty: £86,803.19 (with a 50% discount for early settlement).
• Period of Review: October 2020 – March 2022.
• Scope: Failures in administering five Jersey Private Funds (JPFs), especially Fund A, which invested in fintech/digital assets.
• https://www.jerseyfsc.org/news-and-events/garfield-bennett-trust-company-limited/

KEY FAILURES IDENTIFIED

RETROCESSION FEE ARRANGEMENT

• A GBTCL employee received a portion of the fees, which were then shared with a significant investor in Fund A who also acted as an introducer.
• This arrangement was:
• Not timely recorded
• Not risk-assessed
• Not recognised as a potential financial crime risk
• The JFSC flagged this as a significant conflict of interest.

CONFLICTS OF INTEREST

• Conflicts were either not documented, poorly managed, or not understood.
• Meeting minutes and conflict forms failed to explain how risks would be managed or monitored.
• GBTCL lacked controls to ensure it acted in the best interests of investors.

THIS ENFORCEMENT ACTION HIGHLIGHTS THE NEED TO:

1. Explicitly identify and manage retrocession arrangements as conflicts of interest.
2. Document all conflicts and ensure they are risk-assessed and monitored.
3. Train staff to recognise unusual fee flows and potential financial crime risks.
4. Ensure governance frameworks are robust and tailored to the services provided.

THE JFSC

The Jersey Financial Services Commission (JFSC) has provided clear guidance on retrocession fee arrangements and their place within the broader framework of conflicts of interest in trust company businesses.

• https://www.jerseyfsc.org/news-and-events/dear-ceo-conflicts-of-interest/

What Are Retrocession Fees?

• Retrocession fees are commissions or fees received by a business (eg, a trust company) from third parties (e.g., investment managers or banks) for placing client assets with them.
• These can create conflicts of interest if not properly disclosed and managed.

JFSC Expectations for Trust Companies

1. Recognise Retrocession Fees as a Conflict

1. Trust companies must not narrowly interpret what constitutes a conflict.
2. Retrocession arrangements are explicitly listed as a type of conflict that must be captured in internal controls

2. Board-Level Oversight

1. 1. The Board and senior management must:
   2. Be aware of and authorise any retrocession arrangements.
   3. Please make sure such arrangements are recorded and minuted.
   4. Confirm they are managed in line with internal policies.

3. Compliance Officer Involvement

1. 1. The Compliance Officer should be informed of all retrocession arrangements that may represent a conflict.

4. Mitigation Measures

1. 1. Where necessary, bespoke controls should be introduced to mitigate risks.
   2. This may include:

• • • Disclosure to clients
    • Independent oversight
    • Limiting or prohibiting specific arrangements

5. Staff Training

1. 1. All staff must receive adequate training to identify and manage conflicts, including those arising from retrocession fees.

Operational Implications

• • • Trust companies should review and update their conflicts of interest policies.
    • Any deficiencies or omissions identified during internal reviews must be remedied immediately.
    • The JFSC has stated that conflict management will be a routine topic during on-site examinations

SAMPLE POLICY CLAUSE: RETROCESSION FEES & CONFLICTS OF INTEREST

Subject: Policy Update – Management of Retrocession Fees and Conflicts of Interest

Effective Date: [Insert Date]

Issued By: Compliance Department

1. Purpose

To strengthen our governance and compliance framework in line with JFSC expectations, following recent enforcement actions.

2. Scope

Applies to all employees, directors, and third-party relationships involving client asset placement and fee arrangements.

3. Policy Updates

• Retrocession fee arrangements are now formally recognised as conflicts of interest.
• Staff must not enter into or facilitate retrocession arrangements without formal approval.
• Clients must be informed where retrocession fees are received for their assets.
• All such arrangements must be:
• Disclosed to Compliance and the Board.
• Documented in the Conflicts Register.
• Risk-assessed for financial crime exposure.
• Approved by the Board before implementation.

4. Training & Monitoring

• Mandatory training will be provided to all staff.
• Compliance will conduct periodic reviews and audits of fee arrangements.

5. Non-Compliance

• Failure to comply may result in disciplinary action and regulatory reporting.

INTERNAL MEMO TEMPLATE: RETROCESSION FEE COMPLIANCE UPDATE

To: All Staff

From: [Compliance Officer Name]

Date: [Insert Date]

Subject: Compliance Update – Retrocession Fee Arrangements & Conflict of Interest Policy

Dear Team,

Following 2010 guidance from the Jersey Financial Services Commission (JFSC), and the sanction against Garfield Bennett Trust Company Limited (GBTCL), issued on 31 July 2025, we are updating our internal procedures regarding retrocession fee arrangements.

Retrocession fees—commissions received from third parties for placing client assets—are now explicitly recognised as a conflict of interest. As such, the following actions are required:

• All existing and new retrocession arrangements must be disclosed to the Compliance team.
• No arrangement may proceed without Board-level approval.
• Staff must ensure clients are informed where applicable.
• All arrangements will be logged in our Conflicts Register and subject to periodic review.

Training sessions will be scheduled to ensure everyone understands their responsibilities. Please contact Compliance if you have any questions or if you believe a current arrangement may fall under this category.

Thank you for your attention and cooperation.

Best regards,

[Compliance Officer Name]

[Title]

[Company Name]

References

Dear CEO: conflicts of interest - Jersey Financial Services Commission = https://www.jerseyfsc.org/news-and-events/dear-ceo-conflicts-of-interest/

 Garfield Bennett Trust Company Limited — Jersey Financial Services ... https://www.jerseyfsc.org/news-and-events/garfield-bennett-trust-company-limited/